Redlining
An illegal practice where lenders or insurers deny services or charge higher rates in certain neighborhoods based on the racial or ethnic composition of those areas.
Full Definition
Redlining is an illegal discriminatory practice in which lenders, insurers, or other service providers deny services — or provide them on less favorable terms — to residents of certain geographic areas based on the racial or ethnic composition of those neighborhoods rather than on the financial qualifications of individual applicants. The term originated from the practice of literally drawing red lines around minority neighborhoods on maps to identify areas where loans would not be made. Redlining violates the Fair Housing Act, the Equal Credit Opportunity Act (ECOA), the Community Reinvestment Act (CRA), and HMDA (Home Mortgage Disclosure Act). The opposite — reverse redlining — involves targeting minority communities with predatory loans.
Real-World Example
A bank refuses to approve mortgage applications from creditworthy buyers in a predominantly Black neighborhood while approving similar applications from buyers in neighboring predominantly white areas. This is illegal redlining.
How Redlining Appears on the Real Estate Exam
Common question types, tested concepts, and what to watch out for
Redlining is discrimination by geographic area (neighborhood) rather than individual (though still based on race). Know the laws: Fair Housing Act, ECOA, CRA, HMDA. Distinguish from steering (agent's conduct) and blockbusting (panic selling).
Related Terms
More Fair Housing & Law Terms
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